Tight Range With Mainland Out On Holiday, Property Worry Underpins USD/CNH

USD/CNH tested CNH7.33 in Asia-Pac hours, before retracing to around CNH7.3230 as of typing.

• Weakness in HK equities (centred on continued worry re: the Chinese property sphere) weighed on the yuan.
• A broader bid in the USD was also seen in Asia hours.
• The mainland holiday means that the daily mid-point CNY fixing cannot be used as a defence mechanism for the yuan after the PBoC leaned heavily against runaway weakness via the fix in the lead up to the break (in a bid to promote FX stability).
• Still, the PBoC will not want to let upward moves in USD/CNH to extend too far, so keep an eye on the potential for continued back-channel defence mechanisms, even with the mainland closed.
• Positive hope re: Sino-U.S. relations has done little for CNH, countered by a RTRS source report suggesting that “the Biden administration warned Beijing of its plans to update rules that curb shipments of AI chips and chipmaking tools to China as soon as early October.”
• Well-defined technical parameters remain in play for USD/CNH:
• For bulls, a break of resistance at CNH7.3682, the Sep 8 high, would resume the uptrend and open CNH7.3749, major resistance and the all-time high.